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One Final Look at the Old Mylan

Mylan releases its fourth-quarter financial results.

Two weeks ago drugmaker Mylan Laboratories (NYSE:MYL) stunned the generics industry by gobbling up the generics business of German pharma Merck KGaA for nearly $7 billion despite it being one-and-a-half times the size of Mylan.

Last week Mylan announced its fourth-quarter financial results. They're almost an afterthought now, because the new Mylan with Merck smooshed into it will look so much different than its previous self. For the quarter, Mylan's net revenues gained 53% and its earnings came in at $0.47 a share. But nearly half of the revenue growth comes as a result of Mylan now accounting forits stake in Matrix Labs.

As with any company, the future is more important than the past and Mylan's future, even sans Merck, is solid in terms of upcoming new generic product launches. It has 62 abbreviated New Drug Applications (aNDA) pending FDA approval. More importantly, it is the first to file and could receive six months of generic drug marketing exclusivity on 14 of these aNDAs, a key factor in profitability for generic drugmakers.

With the Merck KGaA generic acquisition and the majority stake in Matrix Labs, Mylan is now a vertically integrated global generics drugmaker with operations throughout the world. The generic drugmakers are rapidly consolidating and changing due to the rush to scale up and spread their fixed costs across a wider top line.

Due to the increasingly litigious nature of the branded pharmaceutical companies in their war against the generics industry, this consolidation strategy makes sense if the generic drugmakers aren't paying too high a price for their acquisitions. What's interesting about the Merck acquisition is that Mylan is paying up to expand its business into countries like Spain while other generic manufacturers like Barr (NYSE:BRL) are rushing to get out of these low-margin markets.

How the industry's competitive landscape shakes out several years from now with this acquisition spree is anyone's guess. Combined with the changing political winds in the U.S., you have a sector that could be poised for top-line growth for years to come.

With the Merck acquisition not expected to be accretive to earnings for at least two years, the question is if Mylan leveraged its financial health too far in its quest to get bigger and keep up in this buyout race.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Barr is a Stock Advisor selection. The Fool has a disclosure policy.